Monday, April 1, 2013

As the US military makes a show of force on the Korean peninsula,
the iShares MSCI South Korea Index Fund (EWY) made a show of force of
its own climbing into Quant’s top 10 for the first time this year. Like a stealth bomber dropping its payload
before anyone notices it, this one has been a bomb before it appeared on our
radar. It ranked as low as 344th
early last month and 135th the week before last when it seems to
have put in a bottom after falling 12% this year. It gained altitude last week climbing the
double digit ranks into this morning’s 8th place.

You don’t have to be the only fat guy in an entire country to know
how to read a chart as even amateur technicians can see that EWYs correction
has brought it down to its magnetic 200 day moving average. Getting your ruler out will show it also
sitting on an uptrend line from the major 2009 bottom. That has helped its technical score recover
from 45.1 at the bottom to 55.6 today. Heightened
political tensions have pushed the sentiment score up to a high 91.1 which is
most responsible for the fund’s good showing lately. Fundamentally it is OK but not great scoring
in the mid 60s. Our behavioral and fundamental
measures comprise EWY’s Green Diamond Reward Rating which has crossed above 9
today. Quant also likes South Korea
giving it an 80.6 country score and iShares can’t do much better than its 98.4
firm score. Those two measures factor
into the fund’s 4.87 Red Diamond Risk Rating which regular readers will notice
is higher than average for top rankers lately.

You don’t have to like the rapper Psy to like EWY but you do have
to like Samsung which accounts for more than 22% of AUM. Better earnings out of the gadget maker could
boost those fundamentals and drive the fund higher on that uptrend line from
2009. Even without that, the 73.4 Behavioral
Score suggests this one’s going to do it “Gangnam Style” for a little while. We don’t know what that means but after a 10%
quarter we are glad to see our models suggest alternatives to the broad US market. We are not seeing a shift yet as Canada is
the only other country represented in the top 10 but our eyes are on our radar
screens. Thank you for keeping your eyes
on ETFGsm, have a good week.